Investors and social media junkies hope that Zynga (NASDAQ:
) isn't an example of the long-term viability of social media
stocks. Since 2012, the stock is down 76 percent.
On Wednesday, the company will report Q1 2013 earnings after
the closing bell with a
set for 5:00 p.m. EST.
Analysts expect the company to report EPS of -$0.04-down from
a positive six cents per share one year prior and down from
analyst expectations of $0.01 per share three months ago. Revenue
is expected to come in at $209.79 million marking a year over
year decline of 36 percent.
Analysts will look closely at Zynga's non-GAAP metric it calls
bookings. Bookings are purchases made while playing a game. If
you purchased a cow while playing Farmville, you added to Zynga's
Analysts expect bookings to come in a $209.7 million-a 36
percent drop year over year.
The Bull Case
As of now, the bull case is a whole lot of speculation. As the
company detaches itself from Facebook (NASDAQ:
), it will have to prove to investors that its popularity didn't
come from being integrated with a social media platform with
billions of users.
The company recently announced a real money gambling venture
in the U.K. where it will split revenues with an
already-established U.K. gambling site. (Attaching itself to
another company-sound familiar?) If Zynga finds solid footing in
this space, and the United States makes online gambling legal at
the federal level, there's little doubt that this would be a
lucrative market for the company.
To be fair, if investors are going to give Apple (NASDAQ:
) some latitude for being between product cycles right now, Zynga
should get a little of the same consideration. As the company
transforms from "that Facebook game company" to a platform that
stands on its own, things will be torn down before they're built
The Bear Case
Its venture into real money gambling would put it ahead of
other companies if the United States approves it for all states
but there's no indication that it will happen anytime soon. For
now, individual states are passing laws approving online gambling
but not even a handful have said yes. Zynga has indicated that it
isn't interested in navigating individual state laws so don't
count on any big revenues from real money gambling in the
The other problem is one of perception. Zynga, like many tech
companies before it, feels a lot like a one or two hit wonder.
Farmville was the buzz but now, none of Zynga's games are the
phenomenon they once were. That could change but in the gaming
business, if people aren't talking, you're probably not
The good news is that the company has seen a 28 percent gain
over the past three months. The less than exciting news is that
the stock topped out at $4 and has since given back 20 percent.
Percentages are often magnified when looking at single digit
stock prices but as of now, Zynga is holding its 200 DMA. If it
breaks below that level, chart action could get ugly.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
Profit with More New & Research
. Gain access to a streaming platform with all the information
you need to invest better today.
Click here to start your 14 Day Trial of Benzinga